eBay Shrugged: Pierre Omidyar believes there should be no philanthropy without profit

“I had a long debate with Pierre,” [Nobel Peace Prize winner] Yunus told me, referring to Omidyar. “He says people should make money. I said, Let them make money—but why do you want to make money off the poor people?” — The New Yorker

This week, India’s newly-elected ultranationalist leader Narendra Modi unveiled his cabinet, three-quarters of whom come from a fascist paramilitary outfit, the RSS (Rashtriya Swayamsevak Sangh) — including one minister accused by police last year of inciting deadly Hindu-Muslim violence that left over 50 dead.

The RSS was founded in 1925 by open admirers of Mussolini and Hitler; in 1948, an RSS member assassinated pacifist Mahatma Gandhi. In 1992, it was the RSS that organized the destruction of the Ayodha Mosque, leaving 2000 dead, mostly Muslims; and in 2002, the RSS played a key role in the mass-murders of minority Muslims in Gujarat, according to Human Rights Watch, when the state of Gujarat was ruled by Narendra Modi — himself a product of the RSS.

Earlier this week, Pando reported that Modi’s election received help from unlikely sources in Silicon Valley including Google, and to a much more serious extent, Omidyar Network, the philanthropy fund of eBay billionaire and First Look publisher Pierre Omidyar.

From 2009 through February of this year, Omidyar Network India Advisers was headed by Jayant Sinha, a longtime Modi adviser and newly-elected MP in Modi’s ultranationalist BJP party ticket. The Omidyar Network partner and managing director played a double role, investing funds in Indian nonprofits and for-profits, some with distinctly political agendas; while privately, the Omidyar man "worked in Modi's team" in 2012-13, and served as director in the ultranationalist BJP party’s main think tank on security and economic policy, the India Foundation. This week, Modi appointed the head of the India Foundation, former intelligence chief Ajit Doval, as his National Security Advisor.

Modi was the “hi-tech populist” candidate: London techies managed Modi’s 3-D hologram campaign, beaming 10-feet-tall Modi holograms to rallies across India. And India’s techies played a key role both in campaigning for Modi and voting for Modi.

Despite the sunny progressive Silicon Valley gloss we’ve been fed these past few decades, Modi’s appeal shows that the tech industry is as prone to far-right authoritarian politics as any other industry.

And that is what makes the Omidyar Network story so revealing: Perhaps no other figure embodies the disconnect between his progressive anti-state image, and his factual collaboration with the American national security state and the global neoliberal agenda, than Pierre Omidyar.

The role of Omidyar Network in so many major events of the past week — helping elect India’s ultranationalist leader Narendra Modi; co-funding Ukraine regime-change NGOs with USAID, resulting in a deadly civil war and Monday’s election of Ukrainian billionaire oligarch Petro Poroshenko; and now, this week’s first-ever sit-down TV interview with Edward Snowden, through an arrangement between NBC News and Pierre Omidyar’s First Look Media — shows how these contradictions are coming to the fore, and shaping our world.

Omidyar’s central role in the US national security state’s global agenda may still come as a shock to outsiders and fans of First Look media’s roster of once-independent journalists. But to White House foreign policy hawks, Pierre Omidyar represents the new face of an old imperial tradition.

Liberal Hawks: Samantha Power, Omidyar & USAID

“For Washington, NGOs are nothing less than ‘America’s invisible sector’ of influence.”

—James Peck, Ideal Illusions In November 2013, UN Ambassador and neocon favorite Samantha Power gave a speech at the Freedom Award ceremony, honoring George Soros’ role in advancing America’s foreign policy strategy through the Open Society-USAID private-public partnership. The Freedom Award is one of the Cold War establishment's top honors; past honorees include George H. W. Bush, Bill Clinton, Winston Churchill, and OSS spy agency founder “Wild” Bill Donovan.

This is Soros’ second Freedom Award, and for good reason, as Ambassador Power explained: Soros’ vision for the world — a world of free markets and “open government” — perfectly synched with President Obama's vision:

A couple of years ago, I had the privilege of listening from the gallery of the United Nations General Assembly when President Barack Obama addressed the heads of state of the world and built an entire affirmative agenda around Karl Popper’s vision, which is George’s vision and which George popularized and resourced: open economy, open government, open society.

After noting that “private donations now equal more than two-thirds of the amount that the U.S. government gives in foreign aid,” Ambassador Power praised Soros’ contributions and singled out his Silicon Valley heir, Intercept publisher Pierre Omidyar:

The new philanthropists—the Soros-modeled philanthropists — donate money, but they do so while they’re still in the prime of their lives... And through his example, George [Soros] has given definition to what it means to be a modern philanthropist, to be a doer, paving the way for Bill and Melinda Gates, Warren Buffet, Pam and Pierre Omidyar, and others. George was first.

Samantha Power would know: In November 2010, while serving in Obama’s National Security Council, she posted on the White House website a glowing description of President Obama’s meeting with an Omidyar-funded Indian NGO, Janaagraha, just one month after the organization received a $3 million grant from Omidyar Network to launch its iPaidABribe anti-corruption campaign. The $3 million grant was Omidyar’s first to an Indian NGO under managing director Jayant Sinha – who, as Pando reported, had a second job as advisor to ultranationalist Narendra Modi.

...for all its celebration of local services, the counter-insurgency strategy doesn’t go far enough to realize the full potential of this approach. Specifically, two key aspects need to be added: first, having local governments be at the centre of civic service improvements; and second, well-defined participatory decision-making processes that empower citizens.

...In other words, counter-insurgency could be thought of as ‘bottom-up nation-building’, not just asymmetric war strategy. Ramanathan is a former Citibank executive and a Yale MBA. Besides fighting corruption in India through his NGO, Ramanathan also runs a microfinance company that targets India’s urban poor borrowers — “maids, vegetable sellers, security guards” according to one description. His microfinance company suffered early on from high default rates and alleged underworld pressures, but has since expanded lately thanks to large private equity investors like Morgan Stanley and KKR.

By taking a closer look at Omidyar Network’s investments in India, we gain insight into where the common interests between Big Tech, the US national security state, and neoliberalism align — and Omidyar's strategic thinking aligning eBay/PayPal with Omidyar Network and First Look media.

Let's start with Omidyar Network's investments in the Rural Development Institute, founded by one of the godfathers of American counterinsurgency strategy: Roy Prosterman.

“Property Rights”: Omidyar and “Phoenix Program” guru Roy Prosterman

Omidyar Network identifies “property rights” (or "property titling") as one of its five areas of focus. One of Omidyar’s personal heroes and largest grant recipients is neoliberal economist Hernando de Soto, the former right-hand man to jailed dictatorAlberto Fujimori. De Soto is the world’s leading peddler of “property titling” as the answer to global poverty: rather than giving aid, De Soto says we should give the world’s poor private property titles, which slum dwellers can presumably collateralize into microloans for their slum-based startups. The results have often been catastrophic — but that hasn’t stopped De Soto from being admired by the world’s ruling elite, ranging from Bill Clinton, to the Koch brothers — to Pierre Omidyar, who gave $5 million to De Soto’s neoliberal think tank, and gushes on Twitter:

India, like many developing countries around the world, has what Anglo-Americans consider a weak legal structure on property rights. In particular, local indigenous peoples lay ancient claims to lands they live on, and have resisted state attempts to forcibly evict them to make way for industry, mining, and other powerful interests. The Naxal Maoist insurgencies raging in parts of India are fueled in part by displaced, landless peoples. Since Modi’s election landslide, global investors have been hopeful that India's land will now be made easier to buy and sell. Omidyar Network’s longtime top man in India, Jayant Sinha—now an MP in Modi’s far-right ruling party — told CNBC that Modi’s first job should be making land acquisition easier:

We have to start with land acquisition. We have to make land acquisition a lot better in terms of both the people that are acquiring the land from the farmer’s and so on as well as for industry.

So perhaps it’s little surprise that Omidyar’s first major India grant, in 2008, went to the Rural Development Institute’s (renamed “Landesa”) program “to help secure land rights for the rural poor” in India’s Andhra Pradesh state. By 2009, Omidyar Network had committed $9 million to the RDI land rights program, the largest grant in the outfit’s history.

And what a history: The Rural Development Institute was founded in 1967 by Roy Prosterman, whose land reform programs were a key element in the Vietnam War counterinsurgency strategy, the “Phoenix” assassination program. The Phoenix program became the template for modern American counterinsurgency — violent terror, combined with soft-power land “reforms” cooked up by Prosterman’s Institute.

During the Vietnam War, Prosterman teamed up with USAID to implement his “land-to-the-tillers” reforms, granting land to peasants as the carrot, while at the same time CIA death squads assassinated tens of thousands of Vietnamese village leaders and terrorized restive regions into submission. The result, Prosterman later boasted, was that Viet Cong recruitment dropped 80 percent.

A decade later, Prosterman sold the same land reform program to El Salvador’s junta, just as the junta was ramping up its deadly attacks on rural civilians that left 75,000 killed by US-backed government forces. Prosterman also served as “land reform” advisor to Philippines dictator Ferdinand Marcos. And in the 1990s, Prosterman was contracted by Booz Allen to advise land reforms in Moldova, according to journalist Tim Shorrock.

A few years ago, Prosterman’s Rural Development Institute changed its name to Landesa. But Prosterman’s Cold War outfit hasn’t changed its close cooperation with USAID, or its core strategic mission, tying land ownership to security (and counterinsurgency) — neatly summed by Landesa’s India director’s article: “Connecting the Dots Between Security and Land Rights in India.”

Leaving aside the alleged benefits to India’s poor of giving them land title to the commons — 400,000,000 Indians live on less than $1.25 a day — for the more powerful interests funding land titling programs, there are endless advantages. It helps create a mass tax base for governments that want to shift more taxes onto the masses; it formalizes and legalizes transfer of property from the commons to the strongest and richest; it makes foreign investors happy; it helps the government and businesses track and keep data on its citizens; and, to quote Omidyar Network managing partner Matt Bannick — recently appointed by the Obama White House to a special taskforce — Prosterman’s land reforms made Omidyar “excited about how micro-land ownership can empower women and help them to pull themselves out of poverty.”

First, a quick word on the theory and practice of microlending. In theory, the original microfinance concept — a nonprofit extending micro-loans to the poor, under favorable terms, below market rates — could be beneficial, and under the right circumstances, it often was. But to the neoliberals, the original microfinance concept smacked of do-gooder state socialism — so microfinance floundered in the margins of the development community until 1992. That year, USAID commercialized a Bolivian microfinance nonprofit called Prodem, creating a new for-profit micro-lender, BancoSol in its place. BancoSol ballooned overnight — both in loans and in profits, making millionaires of the former nonprofit directors before BancoSol nearly collapsed at the end of the decade.

USAID liked the for-profit neoliberal model for microfinance, and it persuaded the World Bank and other global financial institutions to load in and sing its praises. That brought microfinance to the attention of Wall Street funds, eventually pushing out “old” “unsustainable” nonprofit microfinance institutions, and seducing the likes of Nobel Peace Prize winner and microfinance industry guru Muhammad Yunus into the for-profit sector as well. As we now know, it ended in disaster — particularly in India’s Andhra Pradesh state, where Omidyar-funded land title programs had been busy creating legions of rural poor “micro-land owners” now ready to load up on Omidyar-funded microfinance loans. The result would be scores of women driven to grisly suicides, forced prostitution, and despair.

It’s hard to overstate just how central the for-profit microfinance model is to Pierre Omidyar’s "vision." In a 2006 New Yorker article detailing Omidyar’s near-religious zeal for commercializing microfinance, we learn that the eBay billionaire not only rejected the Nobel Peace Prize winner’s appeals to soften his monomaniac focus on profiting off the world’s poor — we also learn that Omidyar was committed to wiping out whatever remained of charitable non-profit microlending, so as not to “distort the market.” Omidyar rejected on principle entreaties from his fellow billionaires to invest in a nonprofit microfinance fund. Because on principle, Omidyar refused to believe that good could come from anything but the self-interested profit motive. Here's the New Yorker:

[Omidyar] often cites Adam Smith’s doctrine that unrestrained market forces and self-interest drive the most efficient—and socially beneficial—use of resources. Omidyar sees Smith’s principles at work in eBay; he believes that eBay’s commercial success was linked to a profound social good.

Omidyar’s faith in the eBay model is so great that he is convinced that it can be applied to solving humanity’s problems, including poverty — and that is why Omidyar singled out for-profit microfinance as his life’s mission. After rejecting Yunus as an “old thinker” wedded to old do-gooderism non-profit thinking, Omidyar announced a $100 million donation to Tufts University, the largest in school history, with the stipulation that the Omidyar-Tufts Microfinance Fund went “specifically” into “investments that would promote microfinance’s commercialization.”

To manage the fund, Omidyar hired a Senior Credit Officer from USAID — the agency that originally commercialized microfinance in 1992 — who channeled Joseph Schumpeter to the New Yorker:

"One of the things we need and we will get is a cycle of creative destruction,” said Tryfan Evans, the director of investments at the Omidyar-Tufts fund, who previously worked at U.S.A.I.D. “If you’re inefficient, you will get overtaken by competitors."

What is rather shocking in hindsight is how fanatical Omidyar’s faith is in the free market, to the point that he’s willing to risk exploiting the most vulnerable poor on earth to prove that Adam Smith is right. The dangers of for-profit microfinance lending to India's poor were no secret: the New Yorker article references a string of microfinance related suicides in Andhra Pradesh back in 2006, before Omidyar’s millions poured oil on that fire.

Yunus failed to dissuade Omidyar:

“Let them make money—but why do you want to make money off the poor people?”

To Omidyar's mind, Yunus just didn't get it. This was about something far more important— Omidyar was proving a theory. To the New Yorker reporter, the eBay billionaire explained:

“Omidyar views the fund as a way of testing his theories about commercializing the sector. ‘It’s really the demonstration impact I’m looking for, primarily,’ he said.”

And so Omidyar tested his theory: plowing millions into India’s SKS Microfinance via investments into murky microfinance outfit Unitus. In 2010, SKS Microfinance listed a $350 million IPO that netted insiders and early investors like Unitus obscene profits. The murky, interlocking nonprofit/for-profit structures ensured that only those on the inside knew whether Omidyar made money on his investment.

The only sure thing was that the explosion of microfinance lending in the state of Andrah Pradesh, led by SKS Microfinance, wound up saddling the world’s poorest and most vulnerable village women with debts they could not pay, causing a wave of suicides. An AP investigation directly implicated Omidyar-funded SKS Microfinance agents in several suicides:

One woman drank pesticide and died a day after an SKS loan agent told her to prostitute her daughters to pay off her debt. She had been given 150,000 rupees ($3,000) in loans but only made 600 rupees ($12) a week.

Another SKS debt collector told a delinquent borrower to drown herself in a pond if she wanted her loan waived. The next day, she did. She left behind four children.

One agent blocked a woman from bringing her young son, weak with diarrhea, to the hospital, demanding payment first. Other borrowers, who could not get any new loans until she paid, told her that if she wanted to die, they would bring her pesticide. An SKS staff member was there when she drank the poison. She survived.

An 18-year-old girl, pressured until she handed over 150 rupees ($3) - meant for a school examination fee - also drank pesticide. She left a suicide note: "Work hard and earn money. Do not take loans."

In all these cases, the report commissioned by SKS concluded that the company's staff was either directly or indirectly responsible. After the report, Omidyar Network scrubbed SKS Microfinance from its website. An old cached webpage shows Omidyar hailing SKS Microfinance for “serving the rural poor in India” and claiming that the murky Unitus private equity fund’s IPO “exit strategy” will “attract more capital to the market.”

Instead, Unitus dissolved its microfinance NGO, a wave of resignations and murky millions moved hands, SKS Microfinance became a pariah, and Andhra Pradesh passed laws regulating microfinance institutions. A tiny handful of insiders and investors pocketed obscene millions, over 200 killed themselves, and entire Indian rural communities were devastated. Self-interest and profit motive did not create the greatest social good that Omidyar believed in; and yet, Omidyar Network continues to expand its portfolio of microfinance — or “financial inclusion” — investments.

eBay Shrugged

“Omidyar stopped talking about microfinance as a way to end world poverty, and instead described its mission in a way congruent with the eBay experience.” —New Yorker

The key to understanding the enigmatic eBay billionaire and his many contradictions — an active participant in Washington’s global empire on a scale unrivaled in publishing, while also founder of a quarter-billion dollar “adversarial journalism” startup and privatizer of the Snowden NSA files, the largest cache of leaked national security secrets in US history — is understanding Omidyar’s eBay-centric vision.

Omidyar is a vision man, as his star employee Jeremy Scahill constantly reminds us. And his vision was shaped, for understandable reasons, by his experience making ten billion dollars overnight off of eBay, which Omidyar believes is proof of a larger philosophical and moral structure at work, rather than a combination of smarts, luck, privilege... and other less savory factors.

In 2000, Omidyar confided to his New York Times biographer, Adam Cohen, that he founded eBay to create a “perfect market” after feeling cheated by the way tech IPOs in the early 1990s let insiders “spin” IPOs for a quick profits before dumping them onto the market to regular investors — like the pre-eBay Omidyar. Cohen writes:

When 3DO announced plans to go public in May 1993, Omidyar placed an order for stock through his Charles Schwab brokerage account.... 3DO went public at $15 a share, but when Omidyar checked his account, he learned that the stock had soared 50 percent before his order had been filled.... it struck him that this was not how a free market was supposed to operate—favored buyers paying one price, and ordinary people getting the same stock moments later at a sizeable markup.

Omidyar’s solution was an online auction. Cohen, a member of the New York Times editorial board, found Omidyar’s story convincing. There was only one problem: At the very time Omidyar spun this yarn to Cohen, Omidyar was under investigation in the largest IPO stock spinning scandal in history. According to a House investigation, in return for giving Goldman Sachs the lucrative eBay IPO, the "vampire squid" bank set up private secret accounts for Omidyar and CEO Meg Whitman letting them spin dozens of tech IPOs before they went to market — ripping off both retail investors and startup investors. Omidyar settled a shareholder fraud lawsuit in 2005 without admitting wrongdoing, ironic for a visionary who believes so deeply in accountability.

As grubby as Omidyar’s greed might sound, it is in perfect keeping with his radical free-market ideology, an ideology that prioritizes self-interest and the profit motive as the greatest engines for good in the world. Of course, the real Omidyar has little in common with the Omidyar of journalistic fairytales — the “civic minded billionaire” and “the billionaire exception” (Columbia Journalism Review), whose “commitment to the investigative form and an open society ” is so great, we “should pray he lives a long and lucid life” (Reuters) — or, the Omidyar that Pulitizer Prize winner Glenn Greenwald described to Amy Goodman:

"...if you look at Pierre’s record of advocacy over the last several years....He would not start a new business in order to make money. He would only start a new business for some goal, some civic-minded goal."

Actually, the real Omidyar would never, on principle, start a new business, or pursue a civic-minded goal, without putting profit at the very center of the project. On principle — because in Omidyar’s mind, no good could possibly come from defying the free markets. That is why he fought with Yunus over the principle of getting rich of the world’s poorest people through microfinance. As the New Yorker explained it:

"eBay would be his template for the future. In 2004, he founded Omidyar Network, which makes for-profit investments as well as philanthropic donations, and as he began to search for vehicles with eBay-like properties he decided that microfinance was an amazing fit. Both eBay and microfinance allow people to discover that they can be entrepreneurs.... Both can be viewed as demonstrations of free-market principles. Both can be seen as businesses whose profitability is linked to their social impact. Omidyar stopped talking about microfinance as a way to end world poverty, and instead described its mission in a way congruent with the eBay experience."

It is impossible for us non-billionaires to grasp how profoundly Omidyar Network’s “philanthropy” is shaped by eBay/PayPal's corporate interests: his enthusiasm for microfinance to the world’s poor is shaped by eBay, and even First Look media — which structurally resembles Omidyar Network’s murky profit/nonprofit pretzel — is turning out to be an eBay-vision-in-progress.

As with Omidyar’s vision for self-supported microfinance as the best means for “social impact,” Omidyar has made it clear he wants First Look to be “self-supported” from the profits of First Look’s “technology company” that will “develop new media tools for First Look properties.” Ebay — which gives people “tools to pursue their goals,” and whose “vast scale” demonstrates “business could also be an effective tool for social good” — is the model for Omidyar Network’s philanthropy; and finally, the circle is closing as eBay transforms itself into a “digital magazine of all things,” according to a former Omidyar employee writing in the Atlantic:

eBay is hiring editors and long-form writers to help turn its site into a "digital magazine," according to president of eBay Marketplaces Devin Wenig.... He wants eBay to be a retail-publisher, not a social network.

"We're now in the content business," Wenig said. "So, for the first time, eBay has a voice. We're telling stories. We have an editor. We have curators. And we have writers on-staff. You'll see that evolve to some longer-form stories, some really beautiful pictures... It's media-like." Viewed through Omidyar’s own lens, and through Omidyar's own words, the contradictions between the White House insider-Omidyar who works hand in glove with the national security state, and maverick publisher-Omidyar pledging to fight the national security state, aren’t really contradictions. Because there is always one right answer whenever those two interests collide, one synthesis to that alleged dialectic: The interest of the shareholders is always right. Omidyar himself explained, in his own words, his eBaysian vision in the case of WikiLeaks, when he chose the self-interest of eBay/PayPal’s shareholders — Omidyar being the number one shareholder — over everything, including the principle of protecting free speech and resisting government repression of WikiLeaks. In his PayPal-WikiLeaks editorial, Omidyar wrote:

Today, it appears, notification of a criminal investigation is enough to force businesses whose cause is not the First Amendment to cut off a publisher the way Amazon, PayPal, Visa and Mastercard each have done WikiLeaks. (Disclosure: Civil Beat Publisher Pierre Omidyar is chairman of eBay, which owns PayPal.) Unlike the press barons of old, the executives of these businesses cannot tell their shareholders that it will hurt their company more to cave on a matter of principle than to drop a customer.It is their right and common practice to shut a customer down when they receive complaints from criminal investigators, even without a court order. This even though the existence of a criminal investigation is no indication of guilt.

The executives have a fiduciary duty to do what’s best for their shareholders. And if they didn’t respond to government warnings, they very well could risk their own business being shut down. There is no doubt, and no difference between the Omidyar who argued with Nobel Peace Prize winner Yunnus about the need to profit off the world’s poorest borrowers; or the Omidyar who pursued the self-interest of eBay’s shareholders over less valuable principles like freedom of expression; or the Omidyar who chooses to collaborate with USAID in Ukraine, or violent ultranationalists in India whose policies could help eBay’s bottom line.

The contradictions exist only in the minds of those who hope and dream of a different Omidyar, an Omidyar of liberal fairytales.

(Special thanks to Aditya Velivelli for helping educate me about India’s complex politics and social fabric—M.A.)